Hey Commonwealthers of Pennsylvania! You are one of the lucky ones who can legally set up a home-based bakery under the Food Safety Act passed in 2010.

The rules are as follows:
1. No animals/pets are permitted in the home at any time.
2. Children are not permitted in the kitchen area during food processing for the business.
3. The water supply serving the home must be from an approved supply. Private sources
must be tested annually for coliform bacteria and Nitrate/Nitrite by the home owner.
4. Department approval may not be in conflict with any local zoning or ordinances. A
written statement from the local municipality must be obtained stating such.
5. Registration and fee ($35.00) by the Department of Agriculture are required, no
exemptions.
6. All ingredients must be separate from those for personal use (separate shelves,
separate cupboards, etc…) and must be properly labeled, stored and protected.
7. There must be restricted use of the home kitchen during any commercial processing.
8. Any required laboratory testing of food products is arranged for and paid for by the
producer.
9. Products must be properly labeled as follows (with some labeling exemptions for
baked goods):

*Name of product
*Name and address of manufacturer
*Ingredients listed in decreasing order by weight
*Allergen declaration if needed
*Net weight or unit count3
10. Nutritional labeling must be included on food products being shipped / sold in interstate commerce. Home businesses may qualify for a small business exemption from nutritional labeling requirements by applying with FDA.
11. Processors must comply with all applicable state and federal laws and regulations.

There are a few additional rules for home bakers, particularly in regard to labelling:
Bakery items made and sold directly to a Commonwealth consumer by the baker (or their employee) do not require any labeling information directly on the products or any form of display of ingredients, but must be available upon request. All other baked goods (bake-off, purchased product) would require full labeling. Items sold at retail, not owned or operated by the baker; require one of the following forms of labeling:
(1) If products are in packaged form all required labeling information must be on the package
(2) Products loose and bulk displayed must have all required label information posted by the display
(3) Bakery items sold at establishments for consumption on the premises, such as a restaurant, require that the label information be available to the consumer upon request.

Using your 401(k) (or other retirement account)

In many cases, 401(k) savings can be used for small business start-up costs without being penalized for early withdraw or higher tax rates. Using your retirement to finance your business is a risk only you and your financial advisor can make, understanding that many businesses fail within the first year. However, many businesses fail because of a lack of capital; so, if you have a good business plan and just need the money to make it happen, it might be a worthwhile risk.

Since other lending options can come with as much risk as using 401(k) savings, it’s often a very attractive choice. Not only do you avoid having to qualify for commercial lending or commit your personal assets to guarantee the loan, but you also avoid having to give up control to an investor.

There are two different ways you can use your 401(k) savings to start your business. In one method, the process is similar to taking a loan against your 401(k), but the maximum cash you can take is $50,000 or 50% of the balance of your 401(k), and if you default on the loan repayment, you’ll be nailed with the extra taxes (unless you are over the age of 59½).

The other method may require the assistance of a CPA or tax attorney who is familiar with the ROBS loan (Rollovers as Business Start-Ups). In this method, a firm will help you create a 401(k) plan for your new business using the funds from your old 401(k). The 401(k) then purchases stock in the company, furnishing you with the start-up capital you need.

Virginia is a state that has a cottage food law Cottage Law which allows its citizens to operate a home based bakery or food processing business. For details you can call the Department of Agriculture and Consumer Services at 804/786-3501

• Catering & Homebased Baking business in Virginia
• Virginia Food Labeling Requirements
• Virginia Department of Agriculture
• Virginia Cooperative Extension for Food Entrepreneurs

We’ve more than doubled the content of our best selling book, Start A Cake Business Today. The newly revised and upgraded version of Start a Cake Business shares our extensive knowledge of running a small bakery business so that aspiring entrepreneurs can affordably learn the fundamentals of starting a cake business and have the necessary tools to be successful. Whether you’ve been creating cakes as a hobby or ready to take your home-based cake business to the next level, this comprehensive book covers every aspect of creating a successful cake business at home, in a shared kitchen or in a commercial cake shop. We cover everything, from writing a business plan and preparing for your first kitchen inspection to creative marketing ideas and attracting new clients. Written clearly and with specific, step-by-step advice, this book aims to pave the way for new cake business owners by informing bakers of all skill levels about:

• Planning and preparation while in the start-up phase
• Paperwork and organizational documents needed
• Creating a business identity including your business name, logo and website
• Legal issues including Business Permits and Licensing
• Utilizing and benefit from the latest marketing strategies
• How to create repeat customers—and stable income—by continually bringing clients back for all the cake occasions of their lives
• Expenses and funding sources
• Insurance, taxes, and accounting
• How to start with a minimal investment
• How to calculate your total product costs and price your cakes for maximum profit
• Creating a professional publicity kit
• Wedding-specific cake business strategies
• Innovative places to sell your cake
• Our 126-step start up plan
• Tools and supplies you’ll need and much more

In addition to the contents of the book, buyers will also have access to the members area of our website to guides, spreadsheets and forms including:

• Recipes
• Contracts and Order Forms
• Farmer’s Market Guide
• Safety and Accident Prevention Guide
• Cake Business Pre-opening and Daily Checklists
• Cash Flow and Cost of Goods Sold Spreadsheet
• Budget, Start-up, Financial projections, Profit and Loss, and others

Education is a life-long endeavor. The knowledge and skills for starting and growing a business are becoming more accesible, more clearly explained, and fine-tuned. The expansion of cottage food laws is creating opportunities that were once only available to a select few. This book is an extension of our commitment to helping educate anyone who wants take their economic future into their own hands by starting a cake business. This is the first time Start a Cake Business has been offered on Kindle. If you’ve ever considered purchasing one of our books, this is a great opportunity and a great price at $9.99.

Contact me if you have any questions.

Paula

What’s happening? That’s the question you should periodically stop and ask yourself as a cake business owner. While you may have a great product, you should keep your eye on the trends that might impact your business. While you shouldn’t always be looking outward or second guessing your product-line, you don’t want to miss out on a profitable phenomenon that your clients want. Here are some suggestions on how to find out about new opportunities and the most effective way to use that information.

Network with other shop owners. Whether you do this in person as business colleagues (perhaps, a monthly group meeting) or online in industry chat rooms and forums (this may be the easiest for your time-crunched schedule, as well as the safest since you aren’t chatting with direct competition), having discussions with like-minded individuals will keep you abreast of what’s happening in other communities. I recently got back into the MeetUp community for small business in my area. It’s a great way to network and keep up with local business concerns. There are meetups for marketing, WordPress and web design, baking, entrepreneurship, business plan writing and more.

Subscribe to magazines. Sometimes, the best way to know what’s happening with trends is to read about it. You should make time to peruse industry magazines. There are a plethora of magazines marketed to cake business owners, but I suggest you don’t forget about magazines like Martha Stewart Living, Cooks Illustrated, and even, the occasional, Ladies’ Home Journal or Good Housekeeping.
The reason these last two are important is that they’re the ones your customers are reading. If your customers are looking at ice cream cone cupcakes in Good Housekeeping, you need to know about it.

Watch Food Network and other T.V. cooking shows. The popularity of food related shows on T.V. has risen astronomically. Nowadays, people credit food shows like Cupcake Wars, Cake Boss, and Ace of Cakes as their ‘must watch’ shows. Therefore, the influence is huge. Your customers know what is available in other markets. You need to be aware too.

Offer samples. Once you learn what’s available, you need to figure out how to use that information. If cake pops are the trend, try one common flavor and create samples for customers for a limited time. You can offer the sample to everyone that orders from you or comes in to your store complimentary, or just to those that make a purchase, even putting a pricing minimum if you want. Later, you can begin selling these on their own and those samples are sure to be in customers’ minds when you do. They’ll be happy with your generosity and already know what to expect from your flavor and quality.

Act quickly. Trends are called trends for a reason; they occur suddenly and for a limited time. Trendy items may one day move to standard, but not always, so it is critical that you act when they’re hot, so to speak. Once you know of a trend that you want to offer, make your plan and start it quickly, taking no longer than a week or two from inception. Customers can be fickle so you don’t want to miss your chance here.

Know your client. When you decide upon which trend to implement, keep your customer base in mind. If your customers are college students or young, business professionals, you probably shouldn’t try cartoon character lollipop cakes just because you saw these on the Food Network channel. No matter how trendy an item is in one area, if it doesn’t fit your demographics, you will be wasting your time.

It’s one thing to be a talented cake decorator, but something quite different to be the owner of a successful cake business. In fact, we’ve seen many technically talented bakers suffer through difficult times, while observing others with less experience and skill achieve great success in business.

I would chalk up the difference in these two different results to the person’s understanding of business knowledge.

You’re A Cake Business Owner… Not A Cake Decorator.

Most people who start bakeries aren’t business people; they’re what E-Myth author Michael E. Gerber calls “technicians.” As a result, it’s not the most talented cake decorator who thrives, but the best marketer and business-minded baker. Here are a few of the most common mistakes in staring a cake business that you should strive to avoid.

#1: Undercharging For Your Time And Talent
This is a typical mistake that almost all new cake decorators make, usually because they start out as an amateur who realizes they can earn money doing what they already love to do. They spend years making cakes for free or at cost, so switching over to charging a profitable price is difficult.

The thing you have to realize is that the moment you charge for a cake, you’ve moved from amateur to professional. That shift requires a change in thinking, especially when it comes to how you view the value of your time. In most cases, selling your cakes means you’ve already made an investment in becoming legal and licensed. Your pricing structure must reflect that overhead. All that is needed is a simple change in perspective: from amateur to serious business owner.

If you are really in business and not just “making some extra money on the side”, you must take seriously the cost of keeping the business open and appreciate the great responsibility just to turn on the oven. With this change in perspective and a realistic valuation of your time, you can calculate healthy prices that correctly value your work and time.

#2: Setting Prices Without Knowing The Total Cost of Goods Sold (COGS)

Pricing is not an arbitrary decision. Successful business owners know how to calculate their COGS (cost of goods sold) in order to produce a menu that will sustain a healthy business. COGS includes all the direct costs necessary for making a sale, but not fixed costs such as internet, telephone, rent etc. Our book provides a COGS calculator, and there are other tools such as Cake Boss software that can assist.

The one thing a lot of bakers omit from their COGS is their time. This is a mistake. Your time is your most valuable asset and you need to charge for it, even if it’s only a small hourly rate.

Having determined the COGS for any cake you sell (typically calculated by serving), it’s good practice to mark that up at least 3 times to produce a final retail price. This is the point at which many beginners hesitate and reduce their prices with the fear of not being able to make a sale.

#3: Failing to Write and Follow A Business Plan
When you’ve decided to switch from hobbyist to business owner, the inertia of the excitement and income can prevent you from pausing to create a business plan. After all, for the creative person, this can be pure drudgery. Unfortunately, without a plan, you are unlikely to achieve long-term success. How can you reach a goal without at least writing it down and tracking your progress?

A business plan is not an abstract document only for large corporations. Rather, it is an actual written plan providing a frame of reference for your cake business, defining your goals, and making you accountable. A business plan doesn’t have to be complicated. In our book, we provide a template and step by step plan for writing a clear, simple-to-follow business plan.

#4: Working For Free
If you’ve spent any time at all in the online cake forums you’ve read about this one: The idea of making a cake for free (or at cost) in the hopes of future orders. You can’t be in any creative service business for very long without someone asking you to take on a job for a very low price with the assurance that your sacrifice now will lead to more high-profile and highly-paid opportunities in the future. “I’m doing you a favor because of all the people who will attend this wedding…”

This is an insult to any baker and does a lot of damage to your business and the cake industry at large. You risk being known as the low-cost cake provider who will negotiate on price. Even if you are newly established, our advice is to always ask for what you and your cakes are worth, and refuse to negotiate when only a promise of exposure is offered.

#5: Magical Thinking
Running a professional cake business, whether at home or in a retail shop is tough business. We like to say, if you’re lucky this is a “get rich slow” business for those that work hard. Most cake business owners will admit that they were naive about the difficulty of running a cake business. The reality is that the cake baking and decorating (the technical piece) is only about 20% of your business efforts. The rest is selling, accounting, marketing, more selling, social media, customer service, ordering supplies, negotiating with just about everybody, etc. Those business-related tasks are a lot like the ones many people hope to leave behind in a job working for someone else. In reality, these are the same tasks required in running any business! The upside is that now when you’re doing those tasks, you’re doing them for yourself and investing in your future, long-term success.

Creating the perfect name for your cake business

Starting a cake business involves many steps that are both creative and strategic. If you are considering how to move beyond baking cakes for friends and family, you’ve probably thought about the identity of your business — your business name and logo. One of the first steps to establish your new identity both legally and from a marketing perspective is deciding on a business name. While initially playing around with names is romantic — daydreaming your name in neon (or something more elegant), at a certain point, you need to decide on a business name in order to create business cards, a Facebook page, buy a URL, etc. This decision can be one of the most important for your cake business.


The name is what people see first, what catches their attention, and what will get them through the door (or website). A good name can bring in business, while a bad name can turn people off from ever even walking in. You can choose a named based off your own creativity, where the business is located, your own life, your inspiration, a unique theme, an adjective that describes the sensibility of your cakes. Here are are few guidelines to consider:

1. The name should be easy to say and spell.  Have you ever noticed how some names just roll off the tongue and are easy to type into a search engine, while others can frustrate you to the point of giving up? An easy to spell name will make it easy for your customers to find you online. The web is the number one way people search for the products and services they need so your business name should take those conventions into consideration.

2. Consider your location. You can also base your cake business name off the area the business is in or anything about where it started. It connects your business to its roots and gives you the chance to keep where it came from with you. No matter where the business is or started, there is always an opportunity to bring in something from its surroundings. Whether your business is in your home or in a large store people can walk into, there are several different ways to incorporate your area into the name. What is popular in the area, the road your business is on, or anything else that brings in some things about the city or town around you.

3. Evoke positivity! When clients think of you, the business name should reinforce something positive and good. Cake is often the centerpiece of a joyful experience so capture that spirit in the name. If your business was helped or inspired by somebody, or you have somebody very important to you, you can also dedicate it to them. Those people who have changed or influenced your life somehow are always great options when choosing a name for your cake business. You can take the joy they brought you and bring it to others in the shape of delicious cakes!

4. Be clear and concise. The name of your business should make it pretty obvious what you do, what your specialty is or the essence of your business. Often a tagline can help if you offer a very specialized niche, but don’t rely too much on extra text or explanation. It can be a tall order to make a name memorable yet simple!

When you run your own cake business, you know there are many steps needed to take to get it running. One decision that requires quite a bit of thinking and patience, is the name. Your cake business name, no matter what influenced it, is the first thing people will see and will be what gets them to take that first step with you.

In the last few years, we’ve witnessed huge changes in the awareness of home food production rules and regulations. People are getting smart about getting legal and taking the necessary steps to operate and grow their cake business in the open and in full compliance of the laws!

If you’re new to the dream of having a cake business at home, here are a few simple starting points:

Every community has regulatory requirements. Some are more restrictive than others when it comes to operating a cake business from home. While each state has websites to help you fill out permits, licenses and regulations these can be difficult to weed through. Information about your legal responsibility can be very confusing and you may receive conflicting information. Persistence is important when searching for the answers about home-based food production. Ultimately, you want to hear the requirements directly from your health inspector, as they typically have the final say in what you can and can not do. That said, citizens are working hard to pass and expand cottage food laws. Check out Denay‘s work at cottagefoodlaws.com as she is always following the latest changes to the laws.


You may also want to contact your local SCORE office for one-on-one help on the other legal and business requirements of a food start-up. In our book, Start a Cake Business Today, we go in depth on the legal requirements, both for small home-based cake businesses and commercial cake shops.

Checklist for Starting a Small Businesses
• Employer’s Identification Number (EIN). Obtain an employer’s ID number with Form SS-4, if you have employees, are a partnership or are incorporated. Sole proprietorships can also obtain and use a TIN instead of the owner’s social security number on all business forms that ask for a “taxpayer identification number.” If a business is not a corporation this identification or Social Security number will be needed before a bank account can be opened.

• Obtain a federal license if required by federal law. Employers must obtain licenses, which are renewable every two years.

• Determine business status. Probably your business will be a sole proprietorship. However if you grow or have business partners you need to determine the legal form of your business. Are you incorporated, a limited liability company, or are you establishing a partnership?

• If needed, obtain a seller’s permit – also known as a Certificate of Authority or a Resale Certificate. Get a resale tax certification or state seller’s permit if the operation will involve purchasing items for resale. This exempts the business from paying sales tax on some of its purchases. Handy when you buy items in bulk! Keep excellent records though so the IRS doesn’t think you’re taking advantage of this.

• Obtain any required state licenses. Most states issue licenses to a business that will provide food services.

• Obtain occupational or health permits often required for food preparation.
• Complete food safety training course. This is a good idea even if not required by law in your jurisdiction.

• Acquire zoning approval, if necessary. Zoning ordinances regulate how property can be used. These ordinances are tools of both state and local governments to regulate the safety, structure and appearance of the community. Make sure that the zoning rules in your area allow the operation of your kind of business.

• Obtain a local business license. Many municipalities or states require a permit to conduct business. The fee is usually based on gross sales, but volume from most part-time ventures falls below the minimum tax level, so, at least initially, it won’t be costly.

• Register your business name if using a name other than your own or a variation of your name. Check with the county clerk locally, and the secretary of state nationwide to determine if a certain name is legally clear.

Know the Law

Check with your local Health Department for the requirements to have a legal health inspected food facility in your town. Each state and town has different requirements. Many states have cottage food laws that permit home baking businesses and only require you upgrade to a commercial license and space when you surpass pre-determined limits.  Earlene Moore shares the fundamentals of what may be required based on her experience of getting legal in her small Texas community.

The risks of operating illegally are real and can result in fines, a visit from the IRS or penalties that prevent you from ever operating a food production business.

There are a number of things that can contribute to success of a new cake business. One of them is to learn as much about the business as you can before you invest a single penny. As a starting point,  I always suggest the new entrepreneur do a self-evaluation. Some of the most basic skills in business cannot be transferred. They need to be innate or part of who you are.

While your commitment to starting a cake business may be strong, it is critical to take the time to answer honestly  some tough questions about running a business in general. Don’t just avoid these questions or provide quick incomplete answers. Your thoughtfulness in  addressing these questions can be very useful in realistically assessing your readiness to start a business.

• Can you test the strength of your interest by starting your business part-time?
• Are you self-motivated, with a strong vision and faith in yourself to persevere?
• Do you like to be in charge, making decisions?
• Are you computer literate enough to handle your own billings, taxes, records, etc.?
• Do you have sufficient funds to cover expenses for the first one to three years?
• Are you a self-starter?
• Are you willing to take advice from others?
• Can you assess risk and make business decisions quickly?
• Do you have a good understanding of your strengths and weaknesses as well as the resources to fill in the gaps in your own skill set?
• Are you willing to take the time to do the research required to start a cake business?

These can be tough questions to face if you haven’t thought of them before.  Please leave your thoughts, questions or concerns in the comments below!

In addition to cakes, many small businesses also offer cupcakes and cake pops. While this might seem an obvious choice, there are some additional considerations you’ll want to address when deciding what options to include in your bakery menu. There are some very good reasons to consider cupcakes in your business plan:

• They are an “evergreen” product, meaning customers want them at all times of the year. Every season is potentially a cupcake season. While the same could be said for cakes, we find that wedding season is one of busiest for cake-only shops.
• Cupcakes can be added relatively inexpensively to your existing workflow. You will incorporate more of an assembly-line approach.
• Cupcakes can be used alongside larger cakes. We often see brides choosing a beautiful cupcake tower with a cutting cake at the top, surrounded by cupcakes decorated in the colors of the wedding.
• Cupcakes are easier to transport and can be sold in a broader variety of locations and may open up wholesale opportunities for your cupcake business. (Think farmers markets, fairs, coffee shops).

While many bakers have gone towards cupcake-only businesses, I believe that offering cakes and cupcakes is still a great way to go, as the tradition of cake cutting, cakes for birthday parties, meals, showers, etc. is still huge. If you have the skills to decorate cakes, a full-service, traditional cake business is likely to distinguish you from those who only sell cupcakes. Let me know what you think!